Tax Planning

Tax Planning 2021 and Beyond

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New Administration, New Taxes?

With a new president and administration, now is a great time to meet with a Trajan Wealth fiduciary advisor to discuss how our new president, Joe Biden, may affect your finances, tax planning, and retirementGiven the balance of the U.S. federal deficit and the federal and state spending during COVID-19, increasing taxes is essential to reducing both federal debts and restoring our economy. Here are some of the tax changes the Biden administration is proposing and how they may impact investors.

Proposed income and payroll taxes:

Increase the top rate for individuals on ordinary income from 37% to 39.6% for incomes over $400,000. The administration has not made it known whether the $400,000 income threshold would apply to single filers, joint filers, or both. Investors may want to consider unique tax planning strategies for lowering their taxable income. For example, one way to save yourself in tax dollars could be contributing more to tax-sheltered retirement accounts.

Biden has proposed taxing both long-term capital gains (LTCGs) and qualified dividends at ordinary income tax rates if a taxpayer’s income exceeds $1 million. The 3.8% net investment income surtax would still apply, so the top federal rate on income above $1 million would almost double to 43.4% for affected taxpayers.

Currently, the Social Security tax (FICA) is capped on earnings above $400,000. Biden’s tax plan is to impose a 12.4% tax on Social Security wages and self-employment income on amounts exceeding $400,000 and create a “donut hole” with no Social Security tax payable on wages or self-employed income between $142,800 (for 2021) and $400,000.

Biden has also indicated an interest in repealing the Tax Cuts and Jobs Act of 2017 (TCJA) and could result in higher individual income tax rates and reduced AMT thresholds. Additionally, this could impact business income and certain investment dividend income.

Wealth transfer:

Repealing the TCJA would reduce the per-person estate transfer tax-exemption from $11.7 million to $5 million or so, dependent on the final repeal version the Biden Administration proposes. Of course, all wealth transfer tax repeals are dependent on lawmakers’ approval. Still, clients with estates may want to consider using their full-exemption to transfer assets to heirs starting now ahead of the decreasing tax exemption. Clients are encouraged to consult their tax and financial professionals on wealth transfer taxes before initiating any transfer strategy.

Capping itemized deductions:

Biden has hinted at capping the benefit of itemized deductions at 28% and restoring the Pease limitations. This cap includes placing a 28% ceiling on itemized deductions including charitable contributions, mortgage interest expense, and State and local taxes currently capped at $10,000.


Biden is a strong advocate of the Affordable Care Act, enacted by President Obama in 2010. He will strive to develop a public health insurance option and make it available to everyone. The public health insurance option’s goals would be to make healthcare more affordable than current private choices. Also, putting an end to the coronavirus pandemic is high on Biden’s priority list. Public health insurance and the ending of the virus will come with a price that tax collection will satisfy.


The Biden Administration has promised “higher wages, stronger benefits, and fair and safe workplaces.” Right away, the new administration plans to create new jobs by hiring individuals in fields that can help fight the pandemic. Investments in clean energy, education, and infrastructure will also bring various new jobs to America under the Biden plan. When it comes to unemployment insurance for the pandemic, Joe Biden hopes to extend it and implement “work-sharing” to help employers avoid layoffs. 

Tax collection is essential to programs that benefit our society but how taxes impact individual investors must be considered in every investment strategy. At Trajan Wealth, we know unique tax-planning strategies that will save you money in 2021 and beyond! Contact our office this quarter to discuss your portfolio and how taxes may affect you in the future.

© 2024 Trajan® Wealth LLC. Nothing in this blog is intended as investment advice, nor is it an offer to buy or sell any security. Please consult your financial advisor for questions about your personal financial situation. All investments involve risk, including the potential for loss. Trajan Wealth clients and employees may have a position in any of the securities mentioned. Portfolio holdings and other data are subject to change at any time and without notice. Additionally, the above links provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Trajan Wealth, L.L.C., of any of the products, services or opinions of the corporation or organization or individual. Trajan Wealth, L.L.C., bears no responsibility for the accuracy, legality or content of the external site or for that of subsequent links. These materials are for informational and educational purposes and are not designed, nor intended, to apply to any person’s individual circumstances. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. Please consult with your legal and/or tax advisor before making any tax-related decisions.